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Coverage, Price, and Competition in the Small Group Health Insurance Market

Posted by: John Tozzi on September 8, 2009

Last week as I was researching this story about Utah’s new health insurance exchange, I wandered into a trove health care data. Using Many Eyes, a free tool from IBM that lets you easily visualize data, I put together the maps embedded below to compare health insurance coverage, price, and competition in the small group market (for employers with under 50 workers).

The idea is to use the data to find relationships between how many small employers offer coverage, the price of insurance (measured by average annual single premiums), and the market share of the largest carrier in each state (where available). You can zoom in and scroll over each state to get this info. (Unfortunately I haven’t found a way to display all three data sets on one map at the same time.)

I don’t think the visualization offers any clear explanations. Nebraska has among the highest premiums and the lowest coverage. But then New Hampshire and New Jersey have high premiums as well, and they both have a relatively high share of small businesses offering insurance. The insurance market is highly concentrated in Alabama, with one carrier controlling 96% of the small group market. But the state’s premiums are lower than Louisiana, where there’s a more competitive market, and a greater number of businesses offer insurance in Alabama.

I’m most interested in whether these figures reflect your experience shopping for health insurance in your state. Do you feel there’s less competition than the chart shows? Do the average premiums sound right to you? Let me know in a comment.

I’ve also set up a topic center at Many Eyes where anyone who’s so inclined can share more data on small business health care.

Reader Comments

Carol Cross

September 8, 2009 3:06 PM

Don't we first need to define or inform as to the legal description of the "small employer" who actually can shop for group coverasge for employees.

Is it the SBA who defines the "small business person" and what is the definition of a small business person
under the law?

The public option as envisioned by the current Administration seems like a good option for any size of small business.

The public option would provide competition for the private plans as well as making health insurance available to the very small businesses who hire only a few employees and who usually confine their employees to part time because they can't provide health benefits like health insurance or overtime pay, etc...

The majority of employees who work for retail franchisees receive NO health insurance and yet franchise jobs are growing in the economy.

Elaine Grant

September 8, 2009 4:25 PM

This is very helpful! But how does MEPS define "small business" for this set of data?

John Tozzi (BusinessWeek reporter)

September 8, 2009 5:37 PM

Thanks, Elaine. For this data set, "small business" means employers with under 50 employees, which is how most states define the "small group" health insurance market.


September 9, 2009 2:03 PM

My company has seventeen employees and our our annual health insurance cost for a single employee is $5,850.00. This is consiserably higher than your average for Texas.

Kelsey Wood

September 9, 2009 2:11 PM

Insurance is State Regulated, therefor, each State has a unique set of variables which effects cost, competition, market share, etc.

HIPPA pushed states to set a definition of small groups at 50 and below. The NAIC is pushing States for standardization and consistance too, such as Guaranteed Issue, limited rate bands, limited rate factors, etc.

Another issue is State mandated coverage. Each State mandates some coverage, such as Oregon, now past 40 mandates. This effects cost disproportionately between states too.

Also, some states allow for a lower cost individual coverage, one that is "underwritten" (company will decline to offer coverage to someone with pre-existing health conditions). Some States have a high-risk pool for declines to go. Some States like Washington prohibited underwriting, but have no mandate to have coverage, and are finding individual prices soaring (you can get it when you want it, and can drop it when done, to pick it back up as the need arises, a very expensive combination)

Consider this as well, some states disproportionately regulate small group, and allow large self-insurance and Union Trusts off many cost hooks, such as state taxation and mandates, thus unequally burdoning small group.

Carol Cross

September 9, 2009 6:11 PM

Kelsey Wood brings up good points.

The States who have "high risk pools" usually negotiate the contract with the biggest carrier in the State. This Carrier is usually the Health Insurance Company who would not accept the "high risk" individual to begin with. The premiums are generally quite high with high deductibles and co-pays and apparently there is enough profit that these State High Risk Pools often subsidize the costs of insurance for those who can't afford to pay the premiums to be in the High Risk Pool.

But, do they pay for the subsidy out of taxes or out of the profits of the Contractor who manages the State High Risk Pool?

Do you know, Kelsey?

Wouldn't the small business owners be helped by a Public Option that would work toward providing uniformity across State lines in terms of premiums, etc. and elibibility for membership?

Regan Turner

September 9, 2009 7:58 PM

Carol...what makes you beleive that a public option will cost less? Cause there is no profit? Did you know that around 60% of all insureds are covered by plans that are NOT FOR PROFIT? Kaiser BCBS plans. We have two plans in CO that are NOT FOR PROFIT. Did you know that the for profit carriers have profits that range from 0-7% of revenue? That most pay out 80-90% of the premiums collected to claims?

Making health care "Affordable" to those supposed 50m unisured will mean someone else will pay for the insurance/healthcare. This means rates will go up buy there might have subsidies from tax payors to pay for the higher cost plans. Tax payors are small business owners and their employees.

I am a small business not sure if you are but....what do you think will be the reality if small or large business is to pay an 8% payroll tax in order to pay for healthcare/insurance. Don't you think its possible that there might be an 8% lowering of pay or pay increases or even worse 8% less employees?

Costs will go up guaranteed! and to those 50% of the population that pay 97% of all income taxes you will also get a tax increase to help pay to cover those unisured people who today mostly choose not to be covered or are illegals. Is it any wonder why the 50% NON TAX payor population wants the other 50% TAX PAYING population to provide "Affordable" Healthcare?

Carol Cross

September 10, 2009 12:34 PM

Regan! Thanks! Perhaps I am not qualified to argue all of your points, and won't try. The Executives who work for the "Not for Profit" Insurance Companies are happy, I'm sure! --with the status quo, and want no competition from the government or any price or wage controls.

But! we have to start somewhere and I think the "public option" as explained by the President is absolutely vital to the goal of providing health care for all of our citizens.

Of course, those who have health care and are satisfied with the status quo want no changes that might negatively impact their health care. But! the enhancements to ALL health insurance plans announced by the President will perhaps overcome all of the negatives.

Are most of the entrepreneurs, the small business men and women with under 50 employees, independent, or are they franchisees of franchisors whose CEO's make thousands of dollars an hour because the big corporate franchisor escapes all of the burdens of being an employer who has any obligation to provide health care or any benefits to those who provide the gross sales upon which the franchisors profit.

How will this Public Option impact the franchisors and the franchisees and what is the position of the International Franchise Association?

Business Week today, Nick Lieber, asks how the Health Care Plan as presented by President Obama will help entrepreneurs ---will it encourage them?

In Franchising, it is the franchisor who is the entrepreneur and the franchisee is merely the resource for the entrepreneur franchisor. The franchisors already are a forty to fifty percent partner, with no risk, in the franchisees' businesses according to Richard Solomon, Author and Franchise Lawyer. The franchisors won't pick up any health insurance costs for their franchisees, that's for sure!

Because Franchisors evade the costs of being employers, they don't do their fair share in contributing to the health and welfare of those "employed" in producing their profits, who reside at the bottom of the pyramid.

Yet! Franchising is growing in our economy and the employees of franchisees generally have no health insurance benefits because the owners of franchises can't bear the costs and survive.

Will the Public Option be a further subsidy by government of the franchisors? Will it help franchisees and their employees?

Julie Orser Odermatt

September 10, 2009 2:24 PM

When is the National Association of Small Business Owners (NAWBO)going to sponsor/offer an Assn plan?

I have been asking this question of NAWBO since 1990...........

J Reed

September 15, 2009 8:22 AM

A truly "small" business has far fewer than the 50 employees defined by the powers that be as small. We have a staff of 5 and pay through the nose to insure them, since we have so few options available. Although we belong to our national trade associations and such, we can't get any sort of group-type policy since that huge hurdle exists known as purchasing across state lines. One wonders how, for instance, my insurance agent can make this happen, since their brand of insurance is sold nation-wide (i.e. "across state lines") and therefore costs HIM less. We MUST have AHP's (Association Health Plans) ASAP to allow truly small businesses--the backbone of our economy--some degree of bargaining power.

Jason D

September 23, 2009 2:46 PM

The problem is that there are local monopolies in small group health insurance run by the 800 lb gorillas in the marketplace such as blue cross blue shield. In certain states, they have arrangements with local providers that make other carriers uncompetitive. Because of the lack of transparency and competition, the cost is passed on to the consumer (small businesses). I have been looking for an affordable solution all year. At first I thought my 60 employee group was too small to self-fund but because my age is average I can actually have a shot at saving money from last year. The best so far I've come up with without losing benefits is the website listed below. The product looks like something outside of the box and I am thinking of implementing it on a 1/1/10 effective date. They have another program too called US health options. Hope this helps my fellow small business owners getting drowned in health care cost!!


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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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